Authors: Tom Hals and Jonathan Stempel

WILMINGTON, Delaware (Reuters) – A Delaware judge ruled on Monday that Tesla (NASDAQ:) CEO Elon Musk is still not entitled to a $56 billion compensation package, even though the electric vehicle company’s shareholders voted in favor in June its restoration.

The ruling by Chancellor Kathaleen McCormick (NYSE:) of the Court of Chancery follows her January decision that found the compensation package excessive and invalidated it, surprising investors and casting uncertainty over Musk’s future at the world’s most valuable automaker.

In a post on X after the decision, Musk said that “shareholders should control the company’s votes, not judges.”

Tesla, in a statement to X, said: “The ruling is wrong and we intend to appeal,” adding that the judge overturned the decision of a majority of shareholders.

Musk and Tesla may appeal to the Delaware Supreme Court as soon as McCormick issues a final ruling, which could happen later this week. It could take a year for an appeal to be heard.

Tesla said in a court filing that the judge should take into account another June shareholder vote for a pay package for Musk, the driving force behind the company responsible for many of its advances, and restore his salary.

McCormick said Tesla’s board did not have the authority to press the “reset” button to restore Musk’s pay package.

“If the court approved the practice of allowing defeated parties to create new facts to review judgments, lawsuits would become endless,” she said in her 101-page opinion.

She said a ratification vote like the one used by Tesla must be held before a hearing, and the company cannot ratify a transaction involving a conflicted controller. She determined that Musk controlled wage negotiations.

She also said Tesla made numerous material misstatements in its proxy statement regarding the vote and could not argue that the vote was a “cure all” to justify restoring Musk’s salary.

Tesla shares fell 1.4% in after-hours trading after the ruling.

Gary Black, managing partner of The Future Fund, which owns Tesla shares, told X that he thinks the Delaware Supreme Court is more pragmatic than McCormick. “I doubt this ruling will be resolved anytime soon and will likely be overturned along the way by a more moderate court,” he wrote.

The compensation package provided Musk with stock options if the company met performance and valuation targets.

Although the prize was originally valued at $56 billion, Tesla’s shares have risen 42% since November 5, when Republican candidate Donald Trump, supported by Musk, won the US presidential election. After this rally, the compensation package is worth about $101 billion.

The ruling came after Trump tasked Musk with creating a more effective government by cutting spending. The role of co-chair of the recent Department of Government Efficiency would be informal rather than governmental, which would enable Musk to keep his job at Tesla as well as leading other companies, including rocket maker SpaceX.

Musk threw himself into Trump’s election campaign and became a close advisor.

PAY DAY FOR PLAINTIFF’S LAWYERS

McCormick also ordered Tesla to pay the lawyers who brought the case $345 million, far less than the $6 billion they initially asked for but nonetheless one of the largest securities litigation awards ever. She said the fee could be paid in cash or Tesla stock.

“We are pleased with Chancellor McCormick’s ruling rejecting Tesla’s invitation to introduce continued uncertainty into the litigation,” said a statement from Bernstein Litowitz Berger & Grossmann, one of the plaintiffs’ three law firms.

The firm also said it looks forward to defending the court’s opinion if Musk and Tesla appeal.

After the January ruling, Tesla shareholders bombarded the court with thousands of letters arguing that stripping Musk of his pay increases the possibility of him leaving Tesla or developing certain products, such as artificial intelligence, in ventures other than Tesla.

Spouse investors and influential Musk fans helped Tesla and Musk win the June shareholder vote, and many of them spoke out on social media against Monday’s decision.

“Beyond the pedantic details of the legal procedure, the bigger problem is that shareholder voices are being ignored,” Omar Qazi wrote in a post on X via @WholeMarsBlog after Monday’s ruling.

“If they can’t consider a vote on this, hopefully they will consider it on appeal,” said Qazi, who has more than 551,000 followers.

In January, McCormick alleged that Musk improperly controlled the board’s 2018 process for negotiating a pay package. The board said Musk deserved the package because he had achieved all of his ambitious market value, revenue and profitability goals.

After January’s ruling, Musk criticized the judge on his social media platform X and encouraged other companies to follow Tesla’s lead and re-register in Texas from Delaware, although it is unclear whether any company has done so.

In her January ruling, the judge called the compensation package “the largest compensation plan in history – an unfathomable sum.” It was 33 times larger than the next largest executive compensation package, Musk’s 2012 compensation plan.

Musk’s 2018 compensation package gave him stock grants worth about 1% of Tesla’s equity each time the company met one of 12 tranches of increasing operational and financial goals.

Musk did not receive any guaranteed salary. Tornetta argued that when voting on the package, shareholders were not told how easily the goals would be achieved.